The Right Investment Loss Attorneys Will Make All the Difference
If you have suffered losses due to investments, you need to explore your legal options for recovering your financial loss. Taking legal action against brokers, brokerages, and investment advisors can be complicated. It is essential to retain an investment fraud attorney who understands the ins-and-outs of securities laws and the legal process used to file claims against investment professionals. Finding a lawyer with the right credentials is difficult, but the investment loss attorneys at Zamansky LLC have the experience and resources to help you prove your case.
What are the Earliest Signs of Investment Fraud?
You may have a claim for damages caused by investment losses if:
- A broker or financial advisor suggested unsuitable high-risk investments. Brokers and advisors are expected to know their customers and recommend investments that are consistent with their customers’ risk tolerances.
- A broker or financial advisor engaged in churning. Excessive trading in your account can cost you money in commissions and fees and make it difficult to experience gains. Churning your account is a breach of fiduciary duty which may be actionable.
- A broker or financial advisor executed unauthorized trades. It is improper and illegal for a broker or advisor to make trades in your account without your explicit authorization.
- Your portfolio was over-concentrated in a particular investment type. It is the responsibility of money managers to diversify portfolios to reduce risks to investors. When a money manager fails to properly diversify your investment portfolio, the manager may be liable if your portfolio declines in value.
- You paid large commissions while your investments lost money. Your investment advisors or stockbrokers may have been focused on their own commissions rather than making sound investments on your behalf.
- High risk private placements were sold to you. Private placements routinely advertise high rates of return in offering memorandums, while downplaying risks of loss of capital. Broker-dealers should only recommend and market high risk private placements to investors who can afford the loss of capital.
- Highly-leveraged ETFs were sold to you. Volatile markets can result in big losses with highly-leveraged ETFs (exchange-traded funds) and leveraged ETFs are inherently riskier than their un-leveraged counterparts. Only sophisticated investors who can afford to sustain losses and manage the risks of highly-leveraged ETFs should be sold this investment product.
The SEC also points to red flag indicators specific to oil and gas scams, including sales pitches promising “can’t miss” or “completely safe” wells and marketing tactics using highly publicized news items.
Additionally, investors who were promised unrealistically high rates of return, and those who were sent unsolicited materials, may also have been the target of deceptive marketing and inappropriate sales practices — such as one of our largest investigations: yield enhancement strategy losses.
Common Investment Fraud Scenarios Handled By Investment Loss Attorneys
As seen with the above, the term “investment fraud” can mean many different things. It includes Ponzi schemes, unauthorized trades, account churning, and the failure to accurately describe the risks of a recommended investment, among other types of misconduct.
Ponzi schemes are a type of investment fraud in which the fraudster attracts investors with the promise of steady earnings, but in reality pays out the “earnings” using money received from newer investors. Probably the most notorious Ponzi scheme was committed by Bernard Madoff. There are certain “red flags” that can alert investors to the possibility that they have invested in a Ponzi scheme. For example, if a financial advisor promises—and delivers—unusually high or steady returns, no matter what the market conditions, that is a reason to be cautious. No investment strategy is perfect and if the results that are promised or delivered seem too good to be true, it’s time to ask questions. Another warning sign is if the investment advisor or stockbroker cannot clearly explain the strategy he or she is employing or explains that it is “proprietary” or a “black box.” If you think you have been a victim of a Ponzi scheme, speak with an experienced investment losses lawyer at Zamansky LLC.
Unauthorized trades are trades undertaken by your financial advisor without specifically discussing the trades with you or without having received written authorization to exercise “discretion” over your account.
Account churning occurs when your financial advisor engages in trading designed to maximize fees and commissions received by the broker, rather than to generate a positive outcome for you, the investor.
Every investment involves risk. A failure to properly describe an investment occurs when a financial advisor emphasizes the potential benefits of an investment without honestly disclosing the risks. This can occur in many different circumstances and, as with most things in life, always keep in mind that if an investment sounds too good to be true, it probably is.
If the investment fraud was committed by someone other than a financial advisor at a brokerage firm—for example a bank, a company issuing stock or other securities or a hedge fund—then the victim can bring a proceeding in state or federal court. The case can be brought either as an individual case or as part of established securities fraud class action. A detailed discussion of our class action practice can be found here.
There are federal and state laws, as well as rules issued by the Financial Industry Regulatory Authority (FINRA), to prevent financial advisors and other financial industry professionals from committing investment fraud against their clients. Under these laws, victims have different legal remedies depending on what type of investment fraud has taken place.
When Should You Consider Contacting Investment Loss Attorneys?
Not all investors are savvy enough to know the specific forms of investment fraud. Below are some of the warning signs that should cause an investor to be concerned:
1. You Can’t Get the Information You Need
As an investor, you are entitled to receive all of the information you need in order to make informed decisions. You are also entitled to access information about your portfolio and your broker’s or advisor’s fees and commissions. If you can’t get the information you need to evaluate an investment or check up on your portfolio, this could be indicative of fraud.
2. Your Broker or Advisor Can’t Explain What Happened
Brokers and advisors should only recommend investments they understand, and they should only execute trades that serve their clients’ investment objectives. If your broker or advisor can’t (or won’t) explain why you have suffered investment losses, this could be indicative of fraud as well.
3. Your Losses Aren’t Consistent with Market Forces
While not all securities follow the market, over time, your portfolio should generally track to market trends. If your investment losses are often inconsistent with market forces (or if you have suffered a substantial loss that is inconsistent with the market’s performance during the relevant time period), you could be a victim of securities fraud.
4. Your Investments Don’t Match Your Investment Profile
Brokers and advisors have a duty to provide suitable investment recommendations. If your investments don’t match your investment profile, then you may have a claim for unsuitability.
5. Your Costs Exceed Your Returns
Charging excessive fees, account churning and other fraudulent practices can cause investors’ costs to exceed their returns. In general, investors should not suffer losses while their brokers and advisors profit at their expense. If you are not earning a reasonable return on your investments, you may have a fraud claim against your broker or advisor.
6. Other Investors Have Suffered Fraudulent Losses
If other investors have suffered fraudulent losses, then there is a good chance that your losses are fraudulent as well. You can learn about investment fraud cases from the U.S. Securities and Exchange Commission (SEC) or by reviewing our investigations.
7. You’ve Identified Other Red Flags for Investment Fraud
From unauthorized trades to inconsistencies on your account statements, there are many additional red flags for possible investment fraud. If you have concerns about investment fraud for any reason, you should contact an investment losses lawyer promptly.
How Do You Handle Investment Fraud?
Recovering fraudulent investment losses begins with proving that you are a victim of securities fraud. This requires your investment loss attorneys to provide proof of five key “elements”:
- Fraudulent Conduct – You must be able to prove that a company, firm, fund or individual committed a fraudulent act. This could be anything from withholding material information to conducting unauthorized trades.
- Intent – Generally speaking, an inadvertent mistake is not enough to give rise to a claim for securities fraud, nor is providing sound advice that ends up leading to market losses. In order to establish a claim for securities fraud, it is necessary to prove that the act or omission in question was committed with intent.
- Reliance – Even if a company made a material omission or your advisor had a conflict of interest (which resulted in a breach of his or her fiduciary duty), you are not a victim if you did not rely on the omission or advice in question. But, if you did rely, then you may have a claim for securities fraud.
- Damages – You must also be able to prove that you suffered damages. These are your fraudulent investment losses; and, while this is generally the easiest element to prove, you must still be able to clearly identify which of your investment losses are the result of the fraud in question.
- Causation – Finally, you must be able to prove that your reliance on the fraudulent act or omission in question caused your damages. If your losses were the result of ordinary market factors that simply coincided with fraudulent conduct, this alone is not enough to establish a claim for securities fraud.
What to Know About Recovery for Investment Losses
Investment fraud and investment loss cases can be quite complex for the average investor to understand. Below are the answers to some common questions that can help you understand the strength of your claim.
Why Is It Important to Check Stockbrokers’ and Investment Advisors’ Credentials?
It is important to check stockbrokers’ and investment advisors’ credentials for two reasons. First, legitimate brokers and advisors don’t always tell the truth. Second, it is becoming increasingly common for scam artists to pose as legitimate brokers and advisors online. The U.S. Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) have both recently issued warnings about these “imposter” scams.
If a broker or advisor provides you with a copy of what is supposed to be his or her BrokerCheck report, this is probably because the broker or advisor (or scam artist) does not want you to obtain the information from FINRA yourself. So, you should always do your own research. It only takes a few seconds, and you can do it for free online.
How Else Can Investors Protect Themselves Against Broker and Advisor Fraud?
Investors can protect themselves against broker and advisor fraud by regularly reviewing their accounts, keeping their records organized in a file, and limiting their broker’s or advisor’s trading authorization. Investors also should not be afraid to ask questions, and they should pursue a consultation with investment loss attorneys at the first sign of potential fraud.
In terms of recovering losses from broker or advisor fraud, the primary option available to investors is FINRA arbitration. Brokerage and investment firms are generally liable for their brokers’ and advisors’ misconduct, so investors can often recover their losses from the firms with which their brokers and advisors are affiliated.
Why Don’t More Investors File Claims for Fraud?
There are a few reasons why more investors don’t file fraud claims. In most cases, investors fail to assert their rights in FINRA arbitration due to one or more of the following:
- They don’t know they are a victim. From not understanding the nature of their investments to being misled by their brokers and advisors, in many cases, investors don’t realize that their losses are fraudulent.
- They are embarrassed to come forward. In some cases, investors may not want to admit that they fell victim to fraud.
- They don’t know how to assert their legal rights. Many investors assume that hiring a lawyer will be expensive and complicated, and they think that it won’t be worth it in the end.
The reality is that all investors who suffer fraudulent losses (or who believe they may have suffered fraudulent losses) should speak with a stockbroker fraud lawyer about their legal rights. Investment fraud is a pervasive issue, and hiring a investment loss lawyer on a contingency-fee basis allows investors to recover their losses without incurring any out-of-pocket costs.
What Tactics do Investment Brokers and Advisors Use to Avoid Investment Fraud Claims?
Investment brokers and advisors frequently rely on the trust they have built with their clients to prevent them from filing fraud claims. Most investors assume that their brokers and advisors have their best interests in mind—and brokers and advisors know this. So, when concerns about investment fraud arise, they reassure their clients that there isn’t an issue.
In some cases, brokers and advisors may create fictitious account statements and engage in other fraudulent practices to try to cover up other misdeeds. These tactics can often be tricky for investors to spot, and, again, investors should take action at the first sign of potential impropriety and contact an investment fraud attorney.
What to Look For in Investment Loss Attorneys
Investment fraud cases require an understanding of all of the laws applicable to brokers and financial transactions. To increase your chances of success, it is important to seek an investment fraud lawyer who has focused his career on securities fraud and who understands the types of legal arguments that can be made against broker-dealers and investment professionals. Often, complex transactions and financial rules come into play in investment fraud cases. Your investment fraud attorney needs to be able to explain in laymen’s terms what happened, why the investment advisor’s behavior was a breach of legal duty, why you are entitled to compensation for losses and the strategy for pursuing recovering.
Zamansky LLC attorneys have more than six decades of combined experience with securities and investment fraud cases and have handled cases nationwide. Investment fraud is the primary focus of our legal practice and we have helped investors stand up to some of the largest brokerage firms in the country to fight for recovery of their financial losses. We represent individual and institutional investors, and we have served as lead counsel in large class action cases in which groups of investors seek to remedy wrongs committed against them by financial professionals.
Zamansky LLC is more than just a securities and investment loss law firm. We are dedicated to representing oil and gas investors and are actively investigating oil, gas and energy-related investment losses. Our investment loss attorneys know how to handle these cases and are on the cutting edge of the industry.
Contact Us Today
Our website includes in depth information on specific types of investment fraud. We strongly encourage you to read this information to gain a fuller understanding of what financial advisors may and may not do. If you have questions, or suspect your financial advisor has committed any type of investment fraud, contact us today for a free consultation with our successful investment loss attorneys. Our offices are located in Manhattan and Miami, but we serve clients nationwide.